06/20/2003: "Healthy Citizens and a Healthy Economy"
During what now appears to be an agonizingly brief respite from the legislative process, I have often been asked about the best and worst of the recent session. There were a lot of good things—economic development initiatives and judicial reforms will pay dividends for years to come. Greater flexibility in funding highway construction can greatly facilitate infrastructure development. To the extent that a stage was set for meaningful school finance reform, there is also much to be gained.
On the worst list, I would have to rate the cuts in higher education (which are the exact intellectual equivalent of a farmer eating his seed corn) and the reductions in medical programs. I’m sure I will have more to say about the former in the future. For now, let’s focus on healthcare.
The next biennium will see a reduction of almost $1 billion in State funding for Medicaid and the Children’s Health Insurance Program (CHIP) relative to the costs of maintaining current benefits. This decrease means foregoing more than $1.6 billion in Federal money. The end result, from an economic standpoint, is just plain ugly. The State will see a “dynamic” revenue loss of almost $500 million, while local taxes will go up by about the same amount (so much for the $1 billion “savings” to taxpayers). Insurance costs will rise by some $1.3 billion, healthcare providers will lose $500 million, and emergency facilities will become even more taxed than they already are.
On an aggregate level, the economy will suffer net losses as a result of these cuts totaling $5.2 billion per year in overall spending, $2.6 billion in gross state product, $1.7 billion in personal income, and $900 million in retail sales. Texas will lose in excess of 45,000 permanent jobs. Unfortunately, the economic malaise is only part of the story. More than 330,000 Texans (many of them children and the elderly) lose Medicaid coverage and almost 170,000 kids are removed from CHIP coverage. The significance of this decision is highlighted even further by a recent report stating that Texans ranked dead last among the 50 states in the percentage of children with health insurance protection—and that was before these cuts! When combined with the growing likelihood that physicians will not accept Medicaid patients and the greater inefficiency in healthcare delivery caused by decreased access for 500,000 citizens, the overall effects are not a pretty sight.
In all fairness, the legislature restructured about 70% of the Draconian cuts that were originally proposed, and lawmakers were faced with an extremely difficult budget dilemma. The poorest of the poor were generally provided for after much anguish and debate. By the same token, rational mechanisms were available to retrieve hundreds of millions of dollars in revenues now leaving the state without resorting to new taxation. These funds, leveraged with the resulting infusion of Federal dollars, could have gone a long way toward improving the fiscal situation. There is also clearly some level of inefficiency in the Medicaid and CHIP systems, and legitimate mechanisms exist to achieve savings without sacrificing quality. Texas would be a stronger state if these options had been more vigorously pursued.
In the final analysis, the elimination of healthcare benefits and access for some of the least advantaged among us has a multitude of harmful effects. It compromises the medical delivery system not only for those who are directly impacted, but also for all Texans. Cuts in Medicaid and CHIP further erode the financial integrity of providers, cause notable and measurable economic losses, and adversely affect our overall business climate.
The result is bad for us and our economy, both physically and fiscally.